Clinical application of pharmacogenetic testing has been proposed as a means of improving treatment outcomes in psychiatry. The identification of a putative genetic test for better clozapine response in schizophrenia offers an opportunity to evaluate the cost-effectiveness of such testing. The authors performed a cost-effectiveness analysis of a genetic test that may identify individuals with greater likelihood of responding to clozapine treatment. We modeled a target population of schizophrenia patients in an acute psychotic episode, using a lifetime time horizon and societal perspective. Outcome measures included life expectancy, quality-adjusted life expectancy, costs, and incremental cost-effectiveness. Effects of variations in testing parameters were also examined. For a 30-year-old with schizophrenia, applying the pharmacogenetic test and treating those predicted to respond to clozapine with clozapine-first cost US $47,705 per additional quality-adjusted life-year, compared with treating all patients with conventional agents and reserving clozapine for treatment-resistant patients. In 1-way sensitivity analyses, test sensitivity and cost had the greatest impact on the incremental cost-effectiveness. We conclude that pharmacogenetic tests may achieve utility in clinical psychiatry, although their cost-effectiveness depends on several clinical parameters. More consistent reporting of test parameters such as sensitivity and specificity would greatly facilitate assessment of future pharmacogenetic studies.